Rajeev Gupta

Akamai: Doomed To Commidification

I agree that the AKAM is high P/E, but you are absolutely wrong on Akamai's business/revenue model. AKAM is NOT a hosting company and it doesn't compete for hosting business with Google, Yahoo or MSFT. Akamai accelerates the web - which is different from hosting. Hosting is actually a natural bi-product of what Akamai does... but it's revenue comes from the traffic.

So ... do I think more people will be browsing internet tomorrow? Yes.
So ... do I think more folks will be downloading movies and songs from Apple? Yes.
So ... do I think more ISVs will be downloading Vista? Yes.
So ... do I think more developers will be downloading Solaris? Yes.
So ... do I think more people will have handsets tomorrow? Yes.
So ... do I think more people will have data access on handsets? You bet, Yes.
So ... do I think more people will watch Football, Baseball and Cricket on Internet? Yes.
Even dishnet picks the stream that is akamaized by akamai!!

All of this generates more traffic and direct revenue for Akamai. Hosting providers don't make money for higher traffic!! Akamai does. Since akamai is more of a monopoly, one can argue that 2 out of 3 bits that flows through the internet generates money for akamai.